Electronic payments between transacting parties have become increasingly prevalent, as the accessibility of technology to enable such payments has increased. For example, a majority of vendors are today equipped to handle credit card and/or debit card transactions. Network-based (or online) vendors are typically heavily dependent on electronic payment services, and may accept a number of electronic payment instruments (e.g., credit cards, debit cards, and other electronic payment services (e.g., the PayPal online payment service)).
A number of companies offer electronic payment (or funds transfer) services (e.g., Visa, Mastercard, American Express, PayPal, etc.). Such electronic payment services naturally charge for the provision of such services, typically on a per-transaction basis. These transaction charges are further typically levied against a vendor that is providing goods or services. While such transaction charges are unattractive to vendors, in many instances the transaction charges are small in comparison to the total transaction value. Further, vendors regard the convenience benefits to both the purchaser and the vendor as outweighing the relevant cost.
The transaction charges levied by the various electronic payment services are, as noted above, typically per-transaction charges, and further often include fixed transaction charges. As a total transaction value decreases, the per-transaction charge of course increases as a percentage of the total transaction value, and the attractiveness to the vendor of using such electronic payment services decreases. It is for this reason that vendors are often reluctant to accept electronic payment (e.g., via a credit card) where the total transaction value is small. The use of electronic payment services becomes particularly unattractive when the transaction costs begin to approach the profit margins associated with a transaction. Consider for example the situation where an online vendor is selling electronic content (e.g., MP3 files) for less than $1. Assuming, for example, a per transaction charge of $0.10, it will be appreciated that the vendor may be reluctant to receive payment via an electronic payment service because 10% of the total transaction value is consumed by electronic payment service charges. The problem becomes more acute as the per item value decreases.
With a view to addressing the problem of transaction charges associated with so-called “micropayments”, a number of solutions have been proposed. One such solution is proposed by Jan Chomicki et al, in “Decentralized Micropayment Consolidation”, Proceedings of the International Conference on Distributed Computing Systems (ICDS '98), May 1998, Amsterdam, The Netherlands. Specifically, a protocol based on the concept of debt consolidation in a decentralized network environment is discussed in this document.